Financial creditors moving the National Company Law Tribunal (NCLT) for initiation of insolvency process will have to mandatorily file ‘default record’ from the information utility (IU). No new petition will be entertained without record of default under Section 7 of the Insolvency and Bankruptcy Code (IBC), said the NCLT in a new directive.
The NCLT has also directed authorised representatives/ parties, in the cases pending for admission under Section 7 of the IBC, to file default record from an IU before the next date of hearing.
What is an IU?
An information utility is a repository of electronic evidence. It is an information network that stores financial data such as borrowings, default, and security interests, among others, of firms.
In India, the National e-Governance Services Limited ( NeSL), in mid-2017, became the first IU for bankruptcy cases under the insolvency and bankruptcy code (IBC).
A record of default is a statement of default on a particular loan and facility. With the latest NCLT move, the entirety of an IU as an integral part of the process to establish default and allow immediate admission before such a Tribunal is now complete, say experts.
The Corporate Affairs Ministry (MCA) had, about four months back, internally taken a decision that there is a need to make IU evidence mandatory in insolvency admission matters.
Today, the NeSL, which started its journey in September 2017, has information of loan details of 100 per cent of the corporates in India. It is sitting on data of ₹76-lakh crore of corporate borrowing outstanding.
As of end April this year, 220 financial institutions, including 75 banks, 147 NBFCs, and two debenture trustees, have uploaded data on the NeSL. Reacting to the latest NCLT move making record of default from an IU mandatory, S Ramann, Managing Director and CEO, NeSL, said: “We are satisfied that the Information Utility is playing its part as per the design of the IBC.”
Vidisha Krishan, Partner, MV Kini & Co, a law firm, said that till date the default record from IU was not mandatory, and even other records or evidence were sufficient to demonstrate a default.
However, now it has been made compulsory vide the latest direction, she added.
Read The NCLT Order dated 12.05.2020
